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Trade secrets across the borders

The European Parliament recently voted to approve a new EU Trade Secrets Directive (the Directive). The Directive is designed to align the protection afforded to trade secrets across Europe, the rationale being that the current discrepancies throughout Europe deter cross-border investment.

Cases of misuse of trade secrets usually involve the activities of employees. Accordingly, the new Directive will impact employers.

Key issues include:

A trade secret is defined in the Directive as information that is secret, has commercial value because it is secret, and has been subject to reasonable steps by the employer to keep it secret. This definition is far narrower than the current protections afforded to 'confidential information' in the UK

The Directive provides that the acquisition, use or disclosure of a trade secret for the purpose of exercising the right to freedom of expression will not be unlawful. This exception is intended to protect journalistic rights however it is very broadly worded and it is possible that others may seek to rely on it

The Directive provides protection from reverse engineering and parallel innovation

A whistleblowing defence is included in the Directive. Its scope is strikingly broad: "for revealing a misconduct, wrongdoing or illegal activity, provided that the respondent acted for the purpose of protecting the general public interest". Unlike the current whistleblowing protections of employees in the UK, the Directive does not impose any requirement on the employee to show that he has a 'reasonable' belief that the disclosure is made in the public interest. This widens the scope for employees to defend disclosures of trade secrets

The Directive also restricts employees' liability in damages to their employers where they acted without intent.

The Directive will prohibit:

The acquisition of a trade secret via unlawful access;

Employee conduct that is contrary to 'honest commercial practices' (a term that has not been defined);

The use or disclosure of a trade secret where this would breach any contractual or other duty, or where the trade secret was acquired unlawfully; and

The exploitation of goods produced using the trade secret where the user knew or ought to have known that the trade secret was acquired unlawfully.

Restrictive covenants are unaffected by the Directive and will remain a matter for national law.

Accordingly, employers are advised to ensure that confidentiality provisions and restrictive covenants are accurate and enforceable.

Compare jurisdictions: Employment & Labor: North America

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